Create a graph illustrating the effect of a price floor on the quantity of a good. in three or four sentences, summarize the graph. upload the graph below.

When a price floor is set in a market, it entails that this price is located above the equilibrium price and this generates distortions in the quantities supplied and demanded.

As we can see in the graph attached, at Pmin price level, there is a surplus situation, in which the quantity supplied exceeds the quantity demanded. The value of this surplus is exactly Q3 - Q1. There is a quantity that will remain unsold due to a lack of demand at that high price if compared to the amount demanded at the equilibrum price. Instead of selling the amount Q2, which would happen in the equilibrium situation, at the new price Pmin, only the Q1 amount is demanded and therefore it would be Q1 the amount supplied too.

Anyway, although less amount is supplied the producer sells at a higher price and is able to increase its profit, this is why the PS (Producer Surplus) is now larger than in the equilibrium situation (picture 2). The PS increase is due to a loss in CS (Consumer Surplus), as now consumers are worse off, they either pay a high price for the good or do not satisfy their need for this product. The amount of surplus from the equilibrium situation, that is not earned by any of the agents in the price floor situation, is called Deadweight Loss (DWL).

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